A fascinating report by Eric Garland in The Atlantic tells of the upswing in local currencies. In the United Kingdom, the Brixton Pound is being floated, engraved on its paper notes the likes of David Bowie in his Ziggy Stardust era. Pegged to the British pound, it serves mainly as a scheme to promote local business and trade, though maybe its a tad more than mere boosterism.

Bavarians are also enthusiastically using the local currency as a protest — the local currency being the Chiemgauer. And similar currencies have popped up around the world, including in Canada and the United States.

The Atlantic story also mentions the idea of a time bank, a one-step-up-from-barter method based on labor hours and (in some cases) accounting for a variety of skill levels. Such systems are in use all over the world . . . though the organizers are careful to make sure that the time is never given a specific value in a hard currency, which would open the door to taxation from governments.

That caveat shows how barter and labor time exchanges might seem the more revolutionary, from, say, an establishment point of view. Governments dont like it when folks evade taxes, at least when normal people do it. (Established rules for offshore accounts, on the other hand, help keep funds safely away from the prying eyes of IRS agents, and that is something common amongst the American wealthy. Just ask Mitt Romney. After all, who wants to pay more?) Government officials get awfully upset when they find someone systematically evading taxes by avoiding legal tender.

And, contrary to Garlands Atlantic article, a number of the time bank buck upstarts do establish exchange rates with official, government-supervised money, allowing taxing authorities to skim from gains made through the trades figured in these offbeat media-of-exchange.

So whats the point of the new micro-currencies? Garland admits that none of these nouveaux monies has become a standard method of buying and selling to replace the existing monetary system. Yet many are finding larger and larger audiences as the crisis that began in 2008 deepens and evolves, allowing more people to do more business outside the â€˜normal economy. Or so he says. He doesnt give much evidence for a true upswing in these competing currencies. Many have been around for some time.

But his reports premise has the feel of being correct. BitCoin — an Internet currency based on, well, really good software and not much else — is, he claims, rapidly gaining adoption, now accepted by a variety of companies selling everything from socks to web server space. Garland quotes a banking industry futurist who says that all of this innovation at the level of local communities is completely logical, and will likely increase in the years to come, citing the recent disruptions in the international monetary order.

Maybe we dont need a futurist to tell us this. Or two (Garland is also a futurist. A great gig if you can get it.) During the Great Depression, many communities promoted tokens and other forms of alternate micro currencies — currencies that allowed small areas to survive collapsed international markets (the result of protectionism run amok as well as bank deflation and crazed government policy).

But whether or not there has been a big uptick in alternate forms of money, certainly the authors interest in the subject — and presumably that of his readers, including me — is a result of our frustrations with the system. You know, inflationist central banking and the much-bailed-out high finance.

Frustrations with money and banking are not new. In the 19th century, a whole horde of monetary cranks and, uh, inventors/innovators cooked up schemes to replace gold- or silver-backed bank money with a variety of free money alternates. After all, the time banks greatest early proponent was Josiah Warren, an Americas genius utopian experimenter and theoretician of individual sovereignty. He set up a time store that proved more successful than most such novelties. That is, it didnt immediately fail, and has been much copied, since.

The trouble with the bulk of the proposals then — and, for all I know, many of the current micro-currencies — is that they were based on the ridiculous notion that money was too scarce and that banks monopolized money and thus hiked up an artificial scarcity that robbed the common folk, blah blah blah. Except for those few banks that actually served as gold warehouses (and there were some, here and there), the majority were fractional reserve banks, and they did not promote monetary scarcity, they engaged in the contrary practice, creating money by pyramiding debt.

What we should want is for money to be scarce. After all, we want it to maintain value, be useful now and in the future. A money that is infinitely plentiful (or increases in amount over time) is (or becomes) utterly valueless, and does nothing for the common man.

Indeed, this is where monetary schemers agreed with the inflationists of the more mainstream Greenback variety, or the folks who wanted free coinage of silver. That is, they were preaching inflationism.

Were a long way from metal-based money, today. And the policy of the age is outright inflationism, so naked and blatant that even William Jennings Cross of Gold Bryan might blush. America evolved a credit money (bankers money) that was then cut loose from gold, in a series of major political moves: 1913s Federal Reserve Act, which established a central bank; FDRs gold confiscation and currency re-evaluation of 1933; and finally Nixons closing of the gold window to foreigners in 1971. Since then weve been stuck with a pure fiat money standard, now consisting mostly of the ones and zeroes in bank computer databases. Its quite a triumph of modern civilization, in a way. Its a wonder it works at all.

Perhaps the question should be: works for whom? And at whose expense? In the theory of money and credit developed by the Austrian School of economics, especially by Ludwig von Mises, its the first acquirers of newly created money — through inflationary credit — who get the most benefit. And, in modern life, that means the government. The further down the trickle of monetary transactions you are — that is, the further you are away from government, its employees and contractors — the less benefit from the new money you get, the more detriment . . . in higher prices.

Its just the working out of supply and demand, only with money.

Today, as the Euro is poised to take a huge hit, and perhaps vanish into historys dirtiest of dustbins, and the American dollar moves further into jeopardy, its no wonder folks are looking for alternatives. Increasing numbers of savvy people now worry that tomorrows euros, dollars and yen will work for almost nobody.

Not many people benefit from a monetary collapse.

Which is why some people may now be scurrying towards alternate forms of money, and others invest in the metals that once backed the old forms: gold and silver.

By merely mentioning gold and criticizing central bank inflationism and the Federal Reserve, Ive of course set up an expectation. When will I mention Ron Paul?

How about now?

Republican presidential candidate, Rep. Ron Paul is well known for being a goldbug. In 1981 he introduced a bill into Congress that would re-establish the gold standard. But nowadays, when it comes to dealing with practical reforms to improve the current monetary system, he isnt touting the old-fashioned gold standard as such. Instead, he echoes eminent monetary economist and Mises protégé, Nobel Laureate F.A. Hayek, promoting Hayeks notion of the denationalization of money, arguing that government policy should allow all currencies to float, favoring none.

Actually, hes done more than merely argue this. Last year he introduced the Free Competition in Currency Act, as Hayekian a piece of legislation as you could imagine.

Instead of instituting a new hard money from the top down, this would let the best money emerge. Let there be (of all things) a free market in money! Right now, we have centrally planned money, and it looks an awful lot like central planning works about as well for money as central planning works in other things. That is, it looks as inefficient and prone to abuse as socialism itself.

The mechanism that Ron Paul thinks would allow for the emergence of better money is normal competition, achieved in this case by removing all or most taxation on trade from one money to another — including taxes on profits from such transactions — and by getting rid of legal tender laws. All the federal government need do is prohibit fraud, and specify what form of money it will take in taxes, etc.

The casual student of economics might wonder how this would work, considering Greshams Law and all. Doesnt bad money drive out the good?

The answer is: Only under conditions of exchange controls. When government enforces a rule that equates bad money with good money, at a rate favorable to that bad money, people hoard the good money and pass on the bad, thus driving the good money out of circulation. But the competition in currency idea is the opposite of that. It gets rid of the price control aspect, the fixed exchange rates. The denationalized money proposal gets around Greshams Law by promoting actual free trade rather than traditional, old-fashioned (and disastrous) government-controlled trade.

Who knows, maybe one of these local currencies will out-compete the Big Boys of government! More likely, some package of gold, silver and other precious metals will serve as the most popular future basis of money.